The collapsing economic consensus on free trade

[RI]

It's been oft repeated in the past couple of years that there exists an economic "consensus" that free trade is a win-win proposition that creates the opportunity for Pareto improvement through decreased prices, higher product differentiation, and optimized capital utilization. Articles like Mankiw's 2015 NY Times piece "Economists Actually Agree on This: The Wisdom of Free Trade" or numerous pieces on less reputable but widely-spread sites like Vox proclaim that economists have a climate change-esque unanimity in favor of free trade. There's a lot of truth in this assertion; as someone inside the profession, there's been plenty of pushback against revising this conclusion as plenty of traditional trade models bare it out. For the laity, it's much easier to portray free trade-skeptics as flat Earth-style deniers in the face of expert "consensus," regardless of how much it rests on imparted wisdom, convention, and tradition for economists who don't work heavily with trade models.

However, in recent years, a number of top economists have started to come out of the woodwork with a message that things aren't as simple as free trade advocates would like us to believe. Perhaps chief among them is MIT's David Autor, who's written several recent papers on the negative impact of US-Chinese export competition. The Autor-Dorn-Hanson series of papers express some serious issues, but it's hardly just them:

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To summarize: Within just the past year, studies in the best economic journals around (AER, Econometrica, etc.) and from  economists as prestigous as Daron Acemoglu have linked free trade to: lower wages, higher unemployment, lower labor force participation, income losses for the poor, income losses for those with less education, declining worker health, increased mental illnesses, higher mortality, higher suicide risks, lower tax revenue, increased property crime, cuts to public services, and that migratory patterns simply can not cope with the rapid hollowing out of the U.S. manufacturing sector.

[RI]

The crazy thing is, Autor still says we benefit from trade with China. Here's him in an interview in April:

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http://www.npr.org/2016/04/18/474393701/china-killed-1-million-u-s-jobs-but-don-t-blame-trade-deals

This is the same economics 101 that neoclassicists have been pushing all along -- they always said that the net gains from trade should be redistributed to the losers. Our society just does a very bad job at it.

You must have taken different courses than me, because my introductory econ courses always pitched trade as an opportunity for Pareto improvement, when it's at best an opportunity, not a guarantee, for Kaldor-Hicks improvement. There's a big practical difference there.

Further, the costs are much larger and more widespread than previously acknowledged. This alone makes the "benefits outweigh the costs" argue more murky, and it's always been dependent on assuming a particular social welfare function in the first place. Trade was never "good" under a Rawlsian framework, but now it's very unclear if it's "good" under various utilitarian frameworks either. It's at least debatable; how can someone say with any certainty if lots of small pluses add up to more than several huge minuses? A priori, you can't, and don't even get started down weighted frameworks.

Autor's work doesn't really look at this question from a social welfare perspective, and, as such, his conclusion that the "benefits outweigh the costs" is ad hoc as any sort of conclusion on the matter would be, simply because utility is fundamentally unmeasurable.

[RI]

No economists would have asserted that free trade benefited *everyone*, just that it was a net positive and Pareto optimal.

Free trade, as enacted in the United States, has clearly not been Pareto optimal as a great many individuals have been made substantially worse off. Our current position could very well be a weak Pareto optimum, but that does not imply that move to reach it was a Pareto improvement. And, as I said before, there is no objective basis on which to claim that trade has, in fact, been a net positive.

It is a little rich, though, for someone living in Washington State - with one of the largest export ports in North America, and a tech industry that has boomed due to cheap hardware imports from places like East Asia - to talk about trade being "never good" in some sense.

I don't recall saying trade is "never good" in any sense. Such absolutes are pointless. The point is that free trade as executed in the United States can not be said with any degree of certainty to be an objective net positive, and to continue to portray that the notion that it is a net positive is a "consensus" among economists for political purposes is deceitful.